Pay equity isn’t just a compliance checkbox. It’s a strategic business decision that impacts retention, morale, recruitment, and your brand reputation. In an era when employees are paying close attention to fairness in compensation, a clear and well-structured salary policy can serve as both a compliance safeguard and a competitive advantage.
Whether you're a growing business, creating your first compensation framework or an established employer correcting historical inequities, building a fair salary policy takes intention, structure, and ongoing monitoring.
Here’s how to get started and why it matters.
Pay equity means compensating employees fairly for equal or comparable work, regardless of gender, race, or other protected characteristics. But more than just the right thing to do, it’s required by law.
The Lilly Ledbetter Fair Pay Act of 2009 clarified that each discriminatory paycheck resets the 180-day statute of limitations for filing an equal-pay lawsuit. This means employers must actively monitor and address inequities, not just correct them once they’re discovered.
At the state level, laws are evolving quickly. For instance, Colorado’s Equal Pay for Equal Work Act and New York's salary transparency laws require even more proactive action. Employers must keep up or risk both fines and reputational damage.
Beyond compliance, a robust pay equity policy helps:
Improve employee trust and loyalty
Attract top talent who value transparency
Reduce turnover and disengagement
Minimize legal risk
According to the 2025 Fair Impact Pay Report from Payscale, employees who believe their pay is below market value are 45% more likely to leave their employer in the next six months than those who think their pay is at or above market value.
Before you can fix inequities, you need to find them. An internal compensation audit provides a clear picture of where gaps exist.
Key areas to examine include:
Median pay by role and department
Starting salaries for recent hires
Pay progression over time by demographic group
Job descriptions and how consistently they reflect current responsibilities
Even subtle inconsistencies can lead to significant pay gaps over time. For example, two employees in similar roles might earn differently due to how assertively they negotiated their starting salary, a structural inequity.
If your audit reveals gaps, act swiftly. The longer they persist, the greater the liability and cultural damage.
You may need to:
Adjust pay for underpaid employees
Revise compensation bands to ensure internal equity
Update job descriptions to reflect actual scope and duties
Standardize offers during recruitment
It’s not about lowering salaries across the board. It’s about bringing compensation up to parity and ensuring future hires are placed equitably within your pay bands.
Explore how HR Compliance Services from Excelforce can help you stay on the right side of regulations.
Now it’s time to put structure in place so you don’t recreate the same issues in the future.
A good salary policy should:
Define salary ranges for every role
Include salary review timelines, typically annually or bi-annually
Offer transparency to managers and employees about how compensation decisions are made
Avoid relying on gut feel or case-by-case negotiation. That creates inconsistency and makes it harder to defend your practices in a legal or public setting.
A salary policy isn’t a set-it-and-forget-it task. Your workforce evolves, and so should your compensation strategy.
Set recurring calendar dates to:
Audit compensation trends
Evaluate promotions and pay raises
Review hiring practices for consistency
Also, educate managers. Fewer than half of employees believe their managers are effective at assessing performance. If pay increases are tied to reviews, make sure those reviews are objective and standardized.
Communicate updates and adjustments clearly to your team. Even if employees don’t always get the raise they hoped for, understanding how the system works can increase trust and reduce resentment.
Pay equity is not just a legal requirement; it’s a reflection of how your company values its people. By building a salary policy that prioritizes transparency and fairness, you create a culture where employees feel respected and motivated to grow.
©2025 - Content on this blog is intended to provide helpful, general information. Because laws and regulations evolve, please consult an HR professional or legal expert for guidance specific to your situation.